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Out WithThe Old

Retailers that don’t move with the trends often get left behind

November, 2002

Not long from now, in the same vein as we refer to old local retailers GEM’s, Arakawa’s and Woolworth, Hawaii residents will reminisce: “Remember McInerny and Liberty House? What about Ethel’s and Robins?” Indeed, the only constant in retail is change, and right now Hawaii’s retail landscape is undergoing its most dramatic metamorphosis in decades.

“Hawaii has experienced more, and greater, change in the last five, maybe even 10 years, than we have in the past 100 years,” explains Carol Pregill, president of Retail Merchants of Hawaii. “The entire pace of our lives is moving so quickly now, and things are changing a lot more rapidly in retail than they ever used to before.”

In the past year alone, we’ve witnessed the sale of locally owned Liberty House to the parent company of Macy’s, retailing behemoth Federated Department Stores Inc. (NYSE:FD); we’ve endured the closure of Chun Kim Chow (a 93-year-old company that owned Ethel’s dress shops and Robins shoe stores), and most recently were saddened by the news that McInerny, too, is shutting its doors once and for all.

McInerny, which announced the closure of its remaining 13 stores by next January, has a history spanning back to 1857, when a ship’s carpenter opened a general-goods store in downtown Honolulu. After several transitions, the retailer narrowed its customer base with a shift in strategies from that of a regional department store to a more tourist-oriented outlet. The company tapered its market share even further by segmenting its stores, so that designated sections of each store featured only select, high-end manufacturers’ products.

“McInerny’s store-within-a-store concept is outdated,” admits Pregill. “It may come back, but right now, the trends are different. Consumers are more value-conscious, and they are not only looking for value, but there’s also a shift in the types of products they’re purchasing.”

That, coupled with the sharp decline of eastbound visitors, caused McInerny’s sales to plummet 25 percent from $24 million in 2000 to $18 million last year. Furthermore, McInerny President Michael Windsor says he projects sales will drop again to roughly $15 million this year.

“One of McInerny’s fundamental problems is that we do not manufacture anything,” says Windsor. “And coupled with continued high landlord expectations in Waikiki for minimum rents, I simply do not see this [shop-within-a-shop] concept re-emerging.”

Although Windsor and his staff have their own immediate problems, he is admittedly concerned about the overall “essentially negative” current retail trends. “My major question is to the future markets. I see nothing of significance beyond the Japanese and mainland U.S.,” says Windsor. He says Waikiki in particular has a three-pronged problem, in that, “One, Hawaii is now vying with Thailand for fifth place in the Japanese outbound market, behind South Korea, mainland U.S., Europe and China; two, mainland U.S. customers in Waikiki do not have high-spending potential; and three, there is no third market.”

His concerns are echoed in the decision of Charlian Wright, corporate marketing director for the Royal Hawaiian Shopping Center, to rethink the retail mix at the center. “Because we serve the visitor market, and because we are Kalakaua frontage – where you will always have high rents – we are having to look at diversifying the types of retailers in the center,” says Wright. “So we’re basically looking for unique shops that you won’t necessarily find at Kahala Mall or Ala Moana, that you have to come to Royal Hawaiian Shopping Center to find.” Wright says the center is not seeking another department store-type merchant to fill either the 35,000-square-foot area that was vacated by McInerny this summer, or the 20,000-square-foot space it will vacate in January.

“Retailers have to move with the trends, or get left behind,” says Pregill. “Still, it’s very distressing that a familiar name will no longer be a part of our local retail environment. Nobody likes to see a retailer close. It’s like losing a longtime friend.”